Bank of England has 'no new toys to play with' to boost economy

The Bank of England has "no new toys to play with" to boost the economy, rate-setter
Paul Fisher has said, despite being handed a more flexible remit by
Chancellor George Osborne last month.

Mr Fisher has voted for a £25bn increase to the Bank of England's quantitative easing programme for the past five months. His calls were backed by the Governor, Sir Mervyn King, and fellow rate-setter David Miles at February and March's meeting.Photo: Jane Mingay

Mr Fisher, a member of Bank's Monetary Policy Committee, said that the new remit, which gives it more room to loosen monetary policy by focusing on growth as well as a 2pc inflation target, did not give the Bank powers to fix the economy.

"There are limits to what monetary policy can do. Nobody has actually given us any new toys to play with in terms of trying to promote the economy," he told the Scottish Herald.

Mr Fisher said the committee would respond to the "more flexible" remit in the August inflation report, once new governor Mark Carney takes over from Sir Mervyn King, who retires in June.

Mr Fisher has voted for a £25bn increase to the Bank of England's quantitative easing programme for the past five months. His calls for more QE were backed by Sir Mervyn and fellow rate-setter David Miles at February and March's meeting.

They argued that more QE would help the British economy to "avoid potentially lasting destruction of productive capacity and increases in unemployment."

"We have the most expansionist monetary policy in 300 years ... the question is do we do a little bit more or not, when you have already done so much and the economy is where it is?"

However, he added that Britain's economy had shown "glimmers of hope" after two years of stagnation. Mr Fisher said that weak growth in Britain's services and manufacturing sectors had been held back by North Sea oil production.

"I expect North Sea oil at least to bottom out shortly and possibly start increasing and construction to be no worse than flat – that would in itself lead to some pick-up in GDP numbers."

Mr Fisher also defended the Bank's actions amid criticism that QE cripples pensioners by reducing annuity rates. "The recession has hit the vast majority of people, not specifically savers or pensioners," said Mr Fisher.

"We have done some work on the effects of QE on pensioners, and if you have had a pension throughout linked to the price index you have probably done better than most workers... pensioners as a group have done relatively well."